The fears of the advertising industry seem to be confirmed: revenues are increasingly concentrated in a few channels that are in the hands of a few players. In addition, there is an economic downturn, a sluggish Christmas business last year and political headwinds. For 2022, the Central Association of the German Advertising Industry (ZAW) reports slight growth in the advertising market of 1.6 percent. However, with a volume of around 48.1 billion euros, the market was still below the pre-crisis level of 2019.

Gregor Brunner

Editor in business.

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But first things first: As early as 2019, there were signs of a slowdown in the economy and also in the mood in the advertising industry. From 2020 onwards, several crises followed one another that dampened people's buying mood. The pandemic, inflation and Russia's attack on Ukraine do not provide a good environment for people to consume. Increasingly, advertising revenues have shifted to where people are increasingly shopping, searching for products and comparing prices: the Internet.

Overall, advertising revenues there grew by 1.8 percent to 11.8 billion euros. The bottom line is that around 208 million euros more flowed into digital channels. The undisputed king among them is search engine advertising, such as Google. Net advertising revenues here grew by 3.5 percent or around 180 million euros to 5.35 billion euros last year. Revenues from advertisements on websites and videos grew by 1.1 percent. In recent years, several advertising media on the Internet have recorded double-digit growth. In 2022, only advertising in audio and video streaming achieved this, increasing by 15.0 and 13.7 percent respectively.

On the other hand, printed advertising media were damaged. Revenues here fell by 1.3 percent from 7.65 billion to 7.55 billion euros. Daily newspapers lost around 99 million euros or 5.6 percent of their advertising revenues, consumer magazines 10.9 percent or around 77 million euros, weekly newspapers 10.3 percent or around 12 million euros.

In an interview with the F.A.Z., Andreas Schubert, President of the ZAW, describes the development as a process of change that other industries have already had to go through, such as film manufacturers who have had to switch to digital photography. "The question for me is how quickly media companies will make the leap into digital while losing their print revenues," he sums up.

No sign of growth

In addition to all other channels such as outdoor or television advertising, the net revenues of advertising media shrank by 0.6 percent or around 147 million euros. Net revenues are part of all advertising investments of around 36.2 billion euros, which increased by 0.3 percent.

However, Bernd Nauen, Managing Director of ZAW, cites higher production costs due to inflation as the reason for this, which means that there can be no talk of growth here. Together with expenditure on sponsorship, catalogues and promotional items, the total market amounts to 48.1 billion euros, compared to 2019.48 billion euros in 3.

So the post-pandemic recovery is not as strong as hoped. But that's not all: two topics threaten to restrict business even further. On the one hand, there are the technical monopolies of the large digital corporations such as Alphabet with its search engine Google, Apple and Meta with the platforms Facebook and Instagram. Their dominant position on the Internet allows them to unilaterally dictate conditions to other market participants.

In most cases, these are played through data protection. Ultimately, however, the requirements often lead to the fact that the data, on the basis of which advertising media can play out targeted and successful advertising to users, remain with the large digital corporations. "The success of these companies is largely due to the restrictions of competition and the one-sided regulatory power they have due to their outstanding market position," says ZAW President Schubert. Several antitrust complaints against these practices are currently underway in various countries and before the EU Commission.

On the other hand, advertisers have to deal with the draft of the Children's Food Advertising Act. The Federal Ministry of Food and Agriculture (BMEL) under Cem Özdemir (Greens) wants to largely ban advertising aimed at children for foods with high sugar, fat or salt content. In general, this would severely restrict food advertising, as advertising would be affected in any environment where children could come into contact with it.

The food association estimates that under the strict criteria of the law, which are based on the requirements of the World Health Organization, advertising for 70 percent of all processed foods could be omitted. If the bill is passed in its current form, the ZAW expects a protracted legal battle over the law.